How to remunerate your sales force

Over the course of my nearly 20 years in recruitment I have had the privilege of partnering with some incredible organisations run by some superb leaders. I love my job as it puts me in a seat where I am often asked to advise leaders on parts of their key strategy which certainly gives me a better understanding of their business when I also help them fill a key headcount in their leadership team.

I was reflecting on this last week over a coffee and there was one key question I get asked to help with more than most. That is: “How should I remunerate my sales force?” I have written more sales structures for businesses than I can count and over the years I have honed this into a defined strategy.

So, I thought I’d share some of my key tips to any of you out in leadership roles where it is your decision on how to remunerate the people taking your product or service to market. Firstly, you need to ask some simple questions:

1. What are the behaviours you are looking to drive through the team?: The wrong rem plan can and will motivate your team to undercut each other, drive margin down or simply demotivate them all together.
2. Are you ‘volume based’ or ‘high value item based’: So many times I have seen this misinterpreted by companies. Decide which game you are playing and build your rem around that. Look at each invoice or each deal value and decide which direction to take.
3. End user or Distribution model: Your sales team may be talking to end users but if your product goes through an intermediary your margin structure should be based around distribution not end user solution. I also classify retail as a distribution model however this has many added layers to consider around in-store strategy and the cost of this.
4. Contract Value or Annuity Stream: Like the above point you are typically playing one game or the other. Your rem structure is different for each so you need to decide which it is.

There are always more questions to ask but these core topics if answered honestly and correctly will give you the fundamental information you need to build your rem plan. Doing your research and understanding your competitors’ landscape will also help but ultimately you need to make a call on the plan and drive it through the business.

As far as what the plan should look like clearly there are a plethora of possibilities from the above information, but I always say:

• Keep it simple, don’t over complicate the rem plan. Nothing demotivates sales people faster than a comm plan they can’t calculate in 5 mins. 
• Align the rem to the key behaviours you want to drive through the team. SOMETIMES a team based structure is just what the doctor ordered. 
• Typically, a rem structure can be as simple as 20%-40% of their base paid quarterly based on top line growth and a specific GP target aligned to company goals. Don’t underestimate how something simple like this can also free up time in other parts of the business which increases overall productivity.
• There will always be a robust discussion around base salary Vs total earnings so ensure you have this sorted early in the process. It is a balancing act but like with anything, good people are hard to find and are often already remunerated well. Ensure you know your market.
• Communicate your decision to your people throughout the process and take them through it step by step. Show them how to work it out and demonstrate how it will positively impact them and ultimately their pockets.

And finally, when in doubt…give me a call. I’m always happy to help good businesses get even better.